A New Approach

By: Alex Mazer

Originally published on Policy Options

The road to building a more sustainable economy and reducing growing income inequality leads through the public treasury. Budgets are a government’s main policy mechanism for dealing with problems like these, targeting more resources for programs and services that work and fewer for those that don’t. Building a sustainable economy will take carbon pricing and public investment in physical infrastructure and learning. Reducing inequality will require changes to tax policy and funding for social programs.

Yet we see little change in the way governments budget. It’s time we did.

Each level of government faces unique budgeting challenges. The federal government needs to figure out what to do with a surplus. Many of the provinces are grappling with a stubborn gap between revenues and expenses. Cities cannot afford to finance the demands on them for infrastructure and housing. But the solutions for better budgeting are applicable to all levels of government.

First, we need to get away from the perception of budgeting as bean counting. Budgets represent a government’s values and long-term strategy. They represent the link between aspiration and resources. Budgets are about priorities, not pie charts. Finance ministers are more than the government’s chief financial officer — a steady-as-she-goes accountant type charged with reassuring financial markets and minding every nickel. They are also the heads of strategy, performance management and revenue generation, not to mention responsible for overseeing key “line” responsibilities such as financial regulation, government assets, macroeconomic policy and more.

We need to begin looking at budgets not morely through fiscal frames — focusing on the size of the deficit and whether the numbers add up — but also as expressions of the overall direction of government and government’s role in society.

Second, we need more truth in budgeting — more fiscal honesty. One of the main sources of public cynicism about politics and government is the tendency of our political class to mislead the public about what is affordable. We need ways to discourage public officials from promising to both cut taxes and improve services. Elected officials need to stop running away from the language and the concept of taxation. Public debate needs to form a tighter link between services and the aspiration for better services, and the dollars required to deliver them.

Third, we need more evidence-based, transparent decision-making, particularly at the federal and provincial levels, where little information is available about the basis for resource allocation decisions. Usually, the budget is developed under a cone of silence and emerges fully formed. Efforts to improve transparency about government spending have mainly focused on nickel-and-dime items such as travel, meals and entertainment, which make up a minuscule percentage of overall expenditures.

More research, both inside and outside government, should be devoted to finding out which programs and services are working and which ones are not. Wherever possible, this research should be made public and should be translated into recommendations that will be useful to decision-makers. Models such as the Washington State Institute for Public Policy — an academe-government partnership focused on program evaluation — can help give evidence more weight in decisions about who gets what.

Fourth, we need to democratize budget making. This means demystifying “fiscal speak” and explaining budgets in terms people can relate to. Giving the public decision-making power over certain portions of the budget can also help. Participatory budgeting, which began in Porto Alegre, Brazil, and is now used in 1,500 places around the world, has empowered millions of citizens by giving them a direct say over a small portion of local capital budgets. Prebudget consultations and budget town halls should also be reimagined to yield more meaningful input. The current versions of these often feel like a box-ticking exercise that does little to help either the government or those it consults with.

We lack a common language to capture the breadth and importance of budgeting. The current resource-constrained era is the perfect time to create one, to swap our old practices and thinking for a new discipline of public sector budgeting.

3 Comments

There is no doubt that budgeting needs to be reconsidered as an expression of the actual aims of government, rather than just some boring exercise in bean counting or whatever.

But is participatory budgeting really the solution? Has it even lasted in Porto Alegre, Brazil?

The introduction of participatory budgeting might or might not get more citizens involved in the budgetary process, but that can lead to inaction more easily than action. Just imagine tens of thousands of cooks in the kitchen, so to speak.

It also seems like a plausible way for government officials to shirk responsibility. If a policy fails, they can blame it on the “people”. One more way for leaders to avoid leading.

I’m interested in Mr. Mazer’s second recommendation – that there should be more truth in budgeting. That would be nice, but how to achieve it?

Mr. Mazer puts things delicately here, in my opinion. It is the “political class” which needs to stop misleading “the public about what is affordable”. It is “public officials” who need to be discouraged from “promising to both cut taxes and improve services”. And it is “elected officials” who must stop running away from “the language and the concept of taxation”. What about the people themselves? What is their responsibility in this? How can one develop an electorate which prefers fiscal honesty to political promises? Or an electorate that doesn’t want BOTH lower taxes AND improved services?

I agree with Mr. Mazer that it would be desirable for elected officials to act in the manner he describes. I don’t know how it could be brought about, however, and I’d like to hear some concrete recommendations on that point. I also think that elected officials are only half the battle, or less. The other part is the people who elect them – what can be done about that?